Activision Blizzard (ATVI) update #8—Chinese bureaucrats in WoW fight

Some light was shed last week on the long-standing delays suffered by licensees of our game publishing company, Activision Blizzard (ATVI) in China with respect to obtaining approval for their massively multiplayer online role-playing game (MMORPG), World of Warcraft (WoW) and various expansions thereto. Apparently, the delays cannot be ascribed to foot dragging on the part of the former licensee, The9 (TCTY), who were canned by Blizzard earlier this year, nor are they reflections of political or trade issues between the USA and China, as some have speculated. According to an article in Friday’s New York Times, the problems stem from a dispute between two Chinese government agencies over who has regulatory control of the huge Chinese online gaming market.

WoW is one of the top ten games MMORPG in China—an estimated 50 million mainlanders are active MMORPG participants—and the only one not published by an Asian-based gaming company (two others are South Korean and the rest are Chinese). The company provides no breakdown, but of the 11.5 million WoW players worldwide,about 4 million are believed to be mainland Chinese.

The first Chinese government agency that Blizzard dealt with—originally from 2003 through The9 and then since 2008 through their current exclusive licensee, NetEase (NTSE)—is the Ministry of Culture, and they have been reasonably accommodating. But for the last couple of years, the General Administration of Press and Publication (GAPP) has required The9 and now NetEase to gain approval of WoW publications—even requiring NetEase to make changes to things that had been approved for years under The9’s aegis in order to gain the goahead to relaunch the game. After months of delays, NetEase finally got the OK in September, but then on Monday, GAPP demanded that NetEase stop accepting new subscriptions and stop collecting fees on pain of losing their access to the internet.

How this will all get resolved is unclear, but it appears in general as if the GAPP is tasked with approving online games prior to publication and the Ministry of Culture with policing them afterwards, which should be good news for Blizzard. In any event, NetEase servers are still operating as of now, and according to the article, the latest GAPP list of “188 companies that it said were running unlicensed, vulgar or overly violent online games” omits NetEase and WoW.